Business-Level & Corporate-Level Strategies

Overview
In this assignment, you are to use the same corporation you selected and focused on for the assignments, Strategic Management and Strategic Competitiveness and External and Internal Environments.

Research the company on its own website, public filings on the Securities and Exchange Commission’s Filing & Forms page, Strayer University’s online databases, the Lexis Advance database, and any other sources you can find. The annual report will often provide insights that can help address some of these questions.

Use the Business-Level and Corporate-Level Strategies Template [DOCX] to ensure that your assignment meets the requirements.

Requirements
Write a 6 page paper in which you do the following:

Analyze the business-level strategies for the corporation you chose to determine the business-level strategy you think is most important to the long-term success of the firm and whether you judge this to be a good choice. Justify your opinion.
Analyze the corporate-level strategies for the corporation you chose to determine the corporate-level strategy you think is most important to the long-term success of the firm and whether you judge this to be a good choice. Justify your opinion.
Analyze the competitive environment to determine the corporation’s most significant competitor. Compare their strategies at each level and evaluate which company you think is most likely to be successful in the long term. Justify your choice.
Determine whether your choice from Question 3 would differ in slow-cycle and fast-cycle markets.
Use at least three quality references. Note: Wikipedia and other websites do not qualify as academic resources.
This course requires the use of Strayer Writing Standards. For assistance and information, please refer to the Strayer Writing Standards link in the left-hand menu of your course. Check with your professor for any additional instructions.

The specific course learning outcome associated with this assignment is as follows:

Determine business-level and corporate-level strategies for a corporation’s long-term success comparable to the competitive environment

ANSWER

Apple’s Business-Level and Corporate-Level Strategies

Analyze the business-level strategies for the corporation you chose 

Apple Inc. clearly states its business strategy in its annual 10-K reports. The primary business strategy is to enhance customer experiences by providing innovative software, hardware, service, and peripherals. Apple Inc. products are characterized by innovative design, seamless integration, and superior ease of use (Jinjin, 2013). The company’s internal capability supports this strategy. Apple Inc. has the resources to create and design its own operating systems, applications and hardware; hence, it can tailor its products/services to meet specific customer needs.

Apple Inc. also pursues disruptive product innovation. This strategy involves perfecting a new product with various trial users and then quickly introducing it to the market to allow buyers to embrace its value proposition (Jinjin, 2013).

Apple also uses the strategic alliance strategy. A strategic alliance is a formal agreement between two or more companies that are strategically relevant to contribute resources and share resources and risks to achieve shared strategic goals. In July 2014, Apple announced an alliance with IBM (Grant, 2018, p.351). The companies agreed to develop apps jointly, and IBM would distribute Apple’s products to its customers. The idea behind this alliance was to combine IBM’s resources (Big data, cloud computing, and analytics capabilities) and Apple’s expertise in mobile hardware to develop enterprise applications.

Apple also has a broad differentiation strategy. The company focuses on constant innovation as one of its strategic objectives. Because its products and services can be easily imitated, the company is compelled to innovate constantly, explaining its heavy investment in R&D (research & development). R&D investments help the company develop next-generation products and keep up with the changing dynamics of the market.

The company also adopted a hybrid strategy that incorporates the cost leadership strategy. The company outsourced all assembly work, logistics, transportation, and manufacturing activities. Apple outsourced the production of iPad models, iPhones, and iPods to Foxconn, a Chinese contract manufacturer (Thompson, 2020, p.132). This outsourcing activity is a cost-leadership strategy. When a company outsources some value chain activities, the burden of integrating state-of-the-art or next-generation technologies is shifted to the supplier. Apple is also a first-mover in the industry.

Which strategy is the most important to the long-term success of the firm? Justify your opinion.

Apple pursues four main business strategies: differentiation, cost-leadership, strategic alliance, outsourcing value-chain activities, and disruptive product innovation. Tanwar (2013) reveals that most companies use a differentiation or cost leadership strategy because Porter believed that an actual combination of these strategies was impossible. According to Porter, combining product differentiation and cost leadership generates conflict between balancing the need to minimize costs and investing in value-added differentiation (Tanwar, 2013). Apple uses this hybrid strategy by combining both the differentiation and cost-leadership strategies.

In my opinion, the strategy most important to the firm’s long-term success is the product differentiation strategy. Although the other strategies contribute to the company’s performance, I feel product differentiation is the company’s primary source of competitive advantage. Providing customers with innovative products is the core value proposition of the company and part of its brand identity. Banker et al. (2014) conducted a linear regression statistical analysis to examine the effect of cost leadership strategies and differentiation on a company’s competitive advantage. The study concluded that using these strategies simultaneously positively impacted a firm’s competitive advantage (Banker et al., 2014).

However, when the authors compared the strategies individually, they concluded that the differentiation strategy is more effective for sustained competitive advantage than the cost leadership strategy. The findings of this study suggest that the product differentiation strategy is more effective than the cost leadership strategy in helping Apple maintain its market performance in the future (Banker et al., 2014). Therefore, the company’s product differentiation strategy is more critical to its future success than other strategies.

Apple pursuing the cost-leadership strategy threatens its core value proposition. Giving customers top-notch innovative products requires the company to make enough profits to fund the production. This need contradicts the cost leadership strategy, which requires the company to control costs strictly. The company should consider changing the existing hybrid strategy because the cost-leadership approach threatens its ability to continue innovating. Tanwar (2013) suggested combining product differentiation and market segmentation strategy to improve the company’s firm performance.

Analyze the corporate-level strategies for the corporation you chose 

Apple’s corporate-level strategy is vertical integration and diversification. The specific vertical integration strategy adopted by the company is backward vertical integration. Backward vertical integration involves using suppliers to perform activities in the early stages of the industry’s value chain. Apple decided to backward the production of its electronic components, hardware, and chips. These are major cost components, and the firm’s suppliers have the in-house production and bargaining power to coordinate design tasks and protect its proprietary technology. The main advantage of this strategy is that it results in significant cost savings.

Another corporate strategy of Apple Inc. is the diversification strategy. Apple has distinctive capabilities in new product development due to its expertise in design aesthetics, ergonomics, software engineering, and hardware technology. These capabilities have enabled the company to create products with unique functionality and customer appeal, differentiating them from rivals’ products.

Which strategy do you think is most important to the firm’s long-term success, and whether you judge this as a good choice? Justify your opinion.

I believe that the diversification strategy is the most important to the company’s long-term success. Product differentiation supports the company’s goal of being a market leader through technology innovation. The company will be aligning its strategies with its vision by pursuing this goal. Aligning business activities and strategy with the vision is a business approach known as strategic alignment. A study by Almajali and Dahalin (2011) showed that strategic business alignment contributes to sustained competitive advantage. Sustained competitive advantage means retaining a competitive advantage in the market for an extended time. Because the differentiation strategy aligns with Apple’s vision, the company should pursue it for sustained competitive advantage.

Analyze the competitive environment to determine the corporation’s most significant competitor. Compare their strategies at each level and evaluate which company you think will most likely succeed in the long term. Justify your choice.

Jinjin (2013) used Michael Porter’s five forces of competition model to analyze competition within the industry. New entrants pose a moderate threat. In the computer sector, competition is severe for the entrants. Competitors in this game are fighting not only for profit margins but also for survival, weakening their threat. Apple has also shifted its strategy to adapt to changing market conditions, making it hard for entrants to establish their market position.

Suppliers have low bargaining power (Jinjin, 2013). Apple has many supplier alternatives in the market to choose from. Grant (2018) indicates that Apple’s suppliers have limited roles; hence, the company can easily substitute them. Buyers have high bargaining power because many brands in the market offer the same products and services (Jinjin, 2013). Academic institutions are one of the company’s customers, but Dell outcompeted it in this segment (Jinjin, 2013). Governments, corporations and institutions have high bargaining power because they can switch to a low-cost competitor whenever they want.

The threat of substitution is weak in the computer segment but high in the software segment. The main rivals in the software market are Windows and Sun. The consumer electronics segment faces fierce competition from Hard Disk Walkman, portable multimedia players, MP3 players, Mini Disk, etc. According to Jinjin (2013), Apple has lost approximately $45 million in the PC sector, and its future in this segment is bleak. Furthermore, it is struggling to maintain its market share in the PC industry because Dell acquired most of its customers in the academic and other public institutions sector. Because Apple has lost substantial profits and many customers to Dell in the PC sector, it should consider it its primary rival.

Compare their strategies at each level and evaluate which company you think will most likely succeed in the long term. Justify your choice.

Apple uses the differentiation and cost-leadership strategy at the business level and vertical integration and differentiation at the corporate level. In contrast, Dell uses a direct sales model. This strategy involves generating revenues by selling directly to customers through a network of salespeople). Grant (2018) stated, “Dell with its direct sales model … points to the weakness of a single dominant logic in a complex, changing world.” This statement means that the direct sales model is not a source of competitive advantage for Dell. Therefore, Apple has the upper hand.

Apple also uses a combination of differentiation and cost-leadership strategies, but Dell uses only the cost-leadership method. As mentioned earlier, the differentiation strategy provides more significant opportunities for sustained competitive advantage than the cost-leadership strategy, giving Apple an advantage over Dell. Grant et al. (2018) indicate that Dell is a fast follower, but Apple is a first-mover. First movers are usually the first to invent and introduce next-generation technologies in the market, while fast-followers have the capabilities and resources to imitate the first-mover’s technology and apply various offensive strategies to outcompete the pioneer. Although both techniques have advantages and disadvantages, the first-mover has a competitive advantage over the fast-follower (Thompson, 2020, p. 143). First, being a first-mover promotes the firm’s brand image, and the company can protect its innovations through copyrights and patents, preventing rivals from imitating them. Therefore, Apple has a competitive advantage over Dell due to its first-mover strategy. Both companies use the vertical integration strategy at the corporate level (Grant, 2018, p.265). Jinjin (2013) recommends aggressive advertising, customer-focused services strategy and “Switchers” campaign to drive sales away from Dell in the academic and public institutions.

Determine whether your choice from Question 3 would differ in slow-cycle and fast-cycle markets.

My choice from Question 3 would not differ in slow-cycle and fast-cycle markets. My choice was that Apple Inc. has a competitive advantage over Dell due to its differentiation strategy. Dell uses a cost-leadership strategy. A study by Li and Li (2008) indicated that dual and cost-leadership strategies are ineffective in less concentrated markets. Markets with low concentration lack competition, and rivalry does not dominate the market; hence, the company is shielded from imitation. Li and Li (2008) indicate that cost-leadership and dual strategies are ineffective in such markets. Because of its cost-leadership strategy, Dell would still be at a disadvantage if both companies were in a slow-cycle market. Li and Li (2008) recommend the differentiation strategy in markets with low concentration; therefore, Apple would still have a competitive advantage.

References

Almajali, D. A., & Dahalin, Z. M. (2011). Factors influencing IT-business strategic alignment and sustainable competitive advantage: a structural equation modelling approach. Communications of the IBIMA. https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.445.8661&rep=rep1&type=pdf

Banker, R. D., Mashruwala, R., & Tripathy, A. (2014). Does a differentiation strategy lead to more sustainable financial performance than a cost leadership strategy?. Management Decision. https://www.emerald.com/insight/content/doi/10.1108/MD-05-2013-0282/full/html?fullSc=1&mbSc=1

Grant, R. M. (2018). Contemporary strategy analysis (10th ed.). John Wiley & Sons.

Jinjin, T. A. N. (2013). A strategic analysis of Apple computer Inc. & Recommendations for the Future direction. Management Science and Engineering, 7(2), 94-103. https://journals.sagepub.com/doi/abs/10.1509/jimk.16.3.1

Li, C. B., & Li, J. J. (2008). Achieving superior financial performance in China: differentiation, cost leadership, or both? Journal of International Marketing, 16(3), 1-22.

Tanwar, R. (2013). Porter’s generic competitive strategies. Journal of business and management, 15(1), 11-17. https://www.researchgate.net/profile/John-Yanney/post/What-is-best-research-instrument-to-measure-porters-strategy-of-differentiation-cost/attachment/59d6438579197b807799ef67/AS%3A443993927491586%401482867809983/download/PGS+2.pdf

Thompson, A. A. (2018). Strategy: Core concepts and analytical approaches. Burr Ridge, Illinois: McGraw-Hill Inc.

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